Google’s parent company Alphabet rebounded during the quarter ending Sept. 30 — following its first-ever revenue decline in Q2 — with total revenues of $46.2 billion driven by increased advertiser spending, Google Cloud, and Play, as companies and consumers turn to cloud computing and online gaming while we ride out the ongoing COVID-19 pandemic.
Google’s cloud business, which includes Google Cloud Platform (GCP) and Google Workspace (formerly G Suite), grew 45% year over year and pulled in $3.44 billion during Q3 of 2020 compared to $2.38 billion a year ago.
And in a surprise turn, Alphabet and Google CEO Sundar Pichai pledged to report Google Cloud’s operating income beginning next quarter. The move follows Pichai’s multi-billion-dollar investment in Google Cloud, which he said will continue through the end of the year and beyond. It also comes as part of Google’s aggressive push to unseat No. 2 cloud provider Microsoft.
Big Shift for Alphabet“Starting with the results for the fourth quarter of 2020, we’ll break out Google Cloud as a separate reporting segment,” he said. “As we have told you on these calls, given the progress we are making, and the opportunity for Google Cloud in this growing global market, we continue to invest aggressively to build our go-to-market capability, execute against a product roadmap, and extend the global footprint of our infrastructure. With segmentation, you will additionally see information about the scale of our investment, which will help you gauge the progress we are making on the multi-year path ahead to create sustainable value.”
Will Google Cloud Income Push Microsoft?This represents a big shift for Alphabet, which, up until the fourth quarter of 2019 didn’t report Google Cloud revenue at all. It also means Google will join No. 1 cloud provider Amazon in disclosing additional information about its cloud income and growth.
The move also puts pressure on Microsoft to give investors more financial details about its public cloud. Microsoft, which reported its earnings earlier this week, said its Azure public cloud grew 48% year over year during its most recent quarter. However, Microsoft has yet to disclose Azure-specific income.
Additionally, it shows Pichai and Google Cloud CEO Thomas Kurian’s confidence that GCP will continue growing its market share as it chases cloud leaders Amazon and Microsoft.
According to Synergy Research Group’s latest numbers, Amazon (33%) and Microsoft (18%) still account for over half of the worldwide cloud market. But Google’s market share continues growing more rapidly than the overall market, and it continues gaining market share. Google won 9% of the market in Q3 up from 8% in Q2.